Juniper, Palo Alto settle two-year patent suit

Palo Alto Networks execs unfazed by day in court

Two years, many motions and one mistrial later, a patent lawsuit pitting Juniper Networks against upstart rival Palo Alto Networks has been settled in Juniper's favour.

In March, a jury failed to reach a verdict in the long-running patent infringement lawsuit, which seemed to indicate that the case would drag on toward a retrial.

However, the two sides went back to the bargaining table, where they'd failed to reach agreement several times before, and hammered out a $175m (£105m) settlement announced Wednesday US time.

Under the terms of the deal, Palo Alto Networks must pay Juniper $75m (£45m) in cash and $100m in current and future stock transactions in order to have all remaining patent litigation pending in Delaware and California courts in the US dismissed.

"Juniper Networks initiated this litigation in order to protect our intellectual property and investment in innovation that is reflected in our leading security products," said Mitchell Gaynor, executive vice president and general counsel at Juniper Networks in a press release.

"This settlement fully achieves those objectives, and we are very pleased with this resolution."

The settlement is expected to have little effect on partners of Palo Alto Networks, a vendor often lauded for running one of the best partner programmes in the US channel, and a company which has grown big enough over the past several years to easily absorb the payout.

At issue was a suit originally filed in December 2011 that alleged that Palo Alto Networks founders Nir Zuk and Yuming Mao infringed on the patents Juniper purchased when it acquired Zuk and Mao's former employer Netscreen Technologies in 2004.

According to Juniper's official court complaint: "Zuk and Mao are acutely aware of the patents-in-suit and the significance of the patented inventions to firewall technology because Zuk and Mao personally worked on the technology and participated in prosecution of one or more of the patents-in-suit when they were executives at NetScreen, the predecessor to Juniper's current security business unit.

"Juniper paid approximately $4bn to acquire NetScreen and its intellectual property, personally enriching Zuk and Mao through their equity interests in NetScreen.

"... Zuk and Mao left to form PAN as a competitor to Juniper. Zuk and Mao then incorporated into [Palo Alto's] products the very technologies they learned about - and helped to develop and patent - while at NetScreen and Juniper.

"Palo Alto Networks has now has begun to use Juniper's own patented technology to compete against Juniper, and is publicly claiming that it plans to grow at a rapid pace in markets pioneered by Juniper products."

Palo Alto Networks president and CEO Mark McLaughlin said in a statement emailed to Channelnomics: "We have reached a settlement with Juniper and are pleased to put this behind us.

"While we are confident of our position in the case, we believe this outcome is in the best long-term interest of our shareholders and customers as it allows us to further focus our efforts on what we do best: innovating, growing the business, and solving the toughest cybersecurity problems for our customers."

Little fazed by the courtroom loss, Palo Alto Networks shares were surging in after-hours trading on Wednesday US time after the company reported revenues for its fiscal third quarter that handily beat analysts' estimates.

For the three months that ended 30 April, Palo Alto saw revenues jump nearly 50 per cent from a year ago to $151m. Analysts had predicted $146m.

McLaughlin said the company's record Q3 was driven by strong customer demand for Palo Alto's next-generation enterprise security platform.

"We achieved the highest rate of new customer acquisition in our history and now serve more than 17,000 customers globally to address their security needs and prevent increasingly sophisticated and complex cyber attacks from compromising an organisation's critical assets," McLaughlin said.

Palo Alto Networks CFO Steffan Tomlinson added that the revenue jump "was driven by our land, expand and retain model, as product, recurring subscription and support revenue all delivered substantial growth.

"Additionally, we continue to demonstrate the power of our hybrid SaaS model as gross margin and operating margin improved."

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